Keng Hua Paper Products Co., Inc. vs. Court of Appeals

8/31/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 286
VOL. 286, FEBRUARY 12, 1998 257

Keng Hua Paper Products Co., Inc. vs. Court of Appeals
*
G.R. No. 116863. February 12, 1998.
KENG HUA PAPER PRODUCTS CO., INC., petitioner, vs.

COURT OF APPEALS; REGIONAL TRIAL COURT OF
MANILA, BR. 21; and SEA-LAND SERVICE, INC.,
respondents.
Commercial Law; Bills of Lading; Nature of a Bill of Lading.

—A bill of lading serves two functions. First, it is a receipt for the
goods shipped. Second, it is a contract by which three parties,
namely, the shipper, the carrier, and the consignee undertake
specific responsibilities and assume stipulated obligations. A “bill
of lading delivered and accepted constitutes the contract of
carriage even though not signed,” because the “(a)cceptance of a
paper containing the terms of a proposed contract generally
constitutes an acceptance of the contract and of all of its terms
and conditions of which the acceptor has actual or constructive
notice.” In a nutshell, the acceptance of a bill of lading by the
shipper and the consignee, with full knowledge of its contents,
gives rise to the presumption that the same was a perfected and
binding contract.
Same; Same; Same; Both lower courts held that the bill of
lading was a valid and perfected contract between the shipper, the
consignee, and the carrier.—In the case at bar, both lower courts
held that the bill of lading was a valid and perfected contract
between the shipper (Ho Kee), the consignee (Petitioner Keng
Hua), and the carrier (Private Respondent Sea-Land). Section 17
of the bill of lading provided that the shipper and the consignee
were liable for the payment of demurrage charges for the failure
to discharge the containerized shipment beyond the grace period
allowed by tariff rules. Applying said stipulation, both lower
courts found petitioner liable.
Same; Same; Same; Contrary to petitioner’s contention, the
notice and the letter support—not belie—the findings of the two
lower courts that the bill of lading was impliedly accepted by
petitioner.—Petitioner’s reliance on the Notice of Refused or On
Hand Freight, as proof of its nonacceptance of the bill of lading, is
www.central.com.ph/sfsreader/session/00000174441c370085083521003600fb002c009e/t/?o=False 1/17
of no consequence. Said notice was not written by petitioner; it

was sent by private respondent to petitioner in November 1982, or
four months after
_______________
* FIRST DIVISION.
258
258 SUPREME COURT REPORTS ANNOTATED
petitioner received the bill of lading. If the notice has any legal
significance at all, it is to highlight petitioner’s prolonged failure
to object to the bill of lading. Contrary to petitioner’s contention,
the notice and the letter support—not belie—the findings of the
two lower courts that the bill of lading was impliedly accepted by
petitioner.
Same; Same; Same; Mere apprehension of violating customs,
tariff and central bank laws without a clear demonstration that
taking delivery of the shipment has become legally impossible,
cannot defeat the petitioner’s contractual obligation and liability
under the bill of lading.—Petitioner’s attempt to evade its
obligation to receive the shipment on the pretext that this may
cause it to violate customs, tariff and central bank laws must
likewise fail. Mere apprehension of violating said laws, without a
clear demonstration that taking delivery of the shipment has
become legally impossible, cannot defeat the petitioner’s
contractual obligation and liability under the bill of lading.
Same; Letters of Credit; In a letter of credit, there are three
distinct and independent contracts.—In a letter of credit, there are
three distinct and independent contracts: (1) the contract of sale
between the buyer and the seller, (2) the contract of the buyer
with the issuing bank, and (3) the letter of credit proper in which
the bank promises to pay the seller pursuant to the terms and
conditions stated therein. “Few things are more clearly settled in
law than that the three contracts which make up the letter of
credit arrangement are to be maintained in a state of perpetual
separation.” A transaction involving the purchase of goods may
also require, apart from a letter of credit, a contract of
transportation specially when the seller and the buyer are not in
the same locale or country, and the goods purchased have to be
transported to the latter.
Remedial Law; Appeals; Questions raised on appeal must be

within the issues framed by the parties and, consequently, issues
not raised in the trial court cannot be raised for the first time on
appeal.—In any event, the issue of whether petitioner accepted
the bill of lading was raised for the first time only in petitioner’s
memorandum before this Court. Clearly, we cannot now entertain
an issue raised for the very first time on appeal, in deference to
the well-settled doctrine that “(a)n issue raised for the first time
on appeal
259
VOL. 286, FEBRUARY 12, 1998 259
and not raised timely in the proceedings in the lower court is

barred by estoppel. Questions raised on appeal must be within the
issues framed by the parties and, consequently, issues not raised
in the trial court cannot be raised for the first time on appeal.”
Same; Attorney’s Fees; The text of the decision should state the
reason for the award of attorney’s fees.—The Court notes that the
matter of attorney’s fees was taken up only in the dispositive
portion of the trial court’s decision. This falls short of the settled
requirement that the text of the decision should state the reason
for the award of attorney’s fees, for without such justification, its
award would be a “conclusion without a premise, its basis being
improperly left to speculation and conjecture.”
PETITION for review on certiorari of a decision of the

Court of Appeals.
The facts are stated in the opinion of the Court.

Cabio, Rabanes Law Office and Romeo B. Perez for
petitioners.
Sycip, Salazar, Hernandez & Gatmaitan for private
respondent.
PANGANIBAN, J.:
What is the nature of a bill of lading? When does a bill of

lading become binding on a consignee? Will an alleged over-
shipment justify the consignee’s refusal to receive the goods
described in the bill of lading? When may interest be
computed on unpaid demurrage charges?
Statement of the Case
These are the main questions

1
raised in this petition2
assailing the Decision of the Court of Appeals
promulgated on
_______________
1 Rollo, pp. 20-32.

2 Tenth Division, composed of J. Fermin A. Martin, Jr., ponente; and
JJ. Emeterio C. Cui (chairman) and Eugenio S. Labitoria, concurring.
260

May 20, 19943

in C.A.-G.R. CV No. 29953 affirming in toto
the decision dated September 28, 1990 in Civil Case No.
85-33269 of the Regional Trial Court of Manila, Branch 21.
The dispositive portion of the said RTC decision reads:
“WHEREFORE, the Court finds by preponderance of evidence

that Plaintiff has proved its cause of action and right to relief.
Accordingly, judgment is hereby rendered in favor of the Plaintiff
and against Defendant, ordering the Defendant to pay plaintiff:
1. The sum of P67,340.00 as demurrage charges, with

interest at the legal rate from the date of the extrajudicial
demand until fully paid;
2. A sum equivalent to ten (10%) percent of the total amount
due as Attorney’s fees and litigation expenses. Send copy
to respective counsel of the parties.
4
SO ORDERED.”
The Facts
The factual antecedents of this case as found by the Court

of Appeals are as follows:
“Plaintiff (herein private respondent), a shipping company, is a

foreign corporation licensed to do business in the Philippines. On
June 29, 1982, plaintiff received at its Hong Kong terminal a
sealed container, Container No. SEAU 67523, containing seventy-
six bales of “unsorted waste paper” for shipment to defendant
(herein petitioner), Keng Hua Paper Products, Co. in Manila. A

bill of lading (Exh. A) to cover the shipment was issued by the
plaintiff.
On July 9, 1982, the shipment was discharged at the Manila
International Container Port. Notices of arrival were transmitted
to the defendant but the latter failed to discharge the shipment
from the container during the “free time” period or grace period.
The said shipment remained inside the plaintiff’s container from
the moment
_______________
3 Rollo, pp. 15-18. The RTC decision was penned by Judge Lourdes K. Tayao-
Jaguros, who was later appointed to the Court of Appeals, from where she has now
retired.
4 Ibid., pp. 17-18.
261
VOL. 286, FEBRUARY 12, 1998 261

the free time period expired on July 29, 1982 until the time when
the shipment was unloaded from the container on November 22,
1983, or a total of four hundred eighty-one (481) days. During the
481-day period, demurrage charges accrued. Within the same
period, letters demanding payment were sent by the plaintiff to
the defendant who, however, refused to settle its obligation which
eventually amounted to P67,340.00. Numerous demands were
made on the defendant but the obligation remained unpaid.
Plaintiff thereafter commenced this civil action for collection and
damages.
In its answer, defendant, by way of special and affirmative
defense, alleged that it purchased fifty (50) tons of waste paper
from the shipper in Hong Kong, Ho Kee Waste Paper, as
manifested in Letter of Credit No. 824858 (Exh. 7, p. 110, Original
Record) issued by Equitable Banking Corporation, with partial
shipment permitted; that under the letter of credit, the remaining
balance of the shipment was only ten (10) metric tons as shown in
Invoice No. H-15/82 (Exh. 8, p. 111, Original Record); that the
shipment plaintiff was asking defendant to accept was twenty (20)
metric tons which is ten (10) metric tons more than the remaining
balance; that if defendant were to accept the shipment, it would
be violating Central Bank rules and regulations and custom and
tariff laws; that plaintiff had no cause of action against the
defendant because the latter did not hire the former to carry the
merchandise; that the cause of action should be against the
shipper which contracted the plaintiff’s services and not against
defendant; and that the defendant duly notified the plaintiff about
the wrong shipment through a letter dated January 24, 1983
(Exh. D for plaintiff, Exh. 4 for defendant, p. 5. Folder of
Exhibits).”
As previously mentioned, the RTC found petitioner liable

for demurrage, attorney’s fees and expenses of litigation.
The petitioner appealed to the Court of Appeals, arguing
that the lower court erred in (1) awarding the sum of
P67,340 in favor of the private respondent, (2) rejecting
petitioner’s contention that there was overshipment, (3)
ruling that petitioner’s recourse was against the shipper,
and (4) computing
5
legal interest from date of extrajudicial
demand.
_______________
5 Petitioner’s brief before the Court of Appeals, pp. 5-8; record of the
Court of Appeals, pp. 21-24.
262

Respondent Court of Appeals denied the appeal and

affirmed the
6
lower court’s decision in toto. In a subsequent
resolution, it also denied the petitioner’s motion for
reconsideration. 7
Hence, this petition for review.
The Issues
In its memorandum, petitioner submits the following

issues:
“I. Whether or not petitioner had accepted the bill of

lading;
II. Whether or not the award of the sum of P67,340.00
to private respondent was proper;
III. Whether or not petitioner was correct in not
accepting the overshipment;
IV. Whether or not the award of legal interest from the
date of private
8
respondent’s extrajudicial demand
was proper.”
In the main, the case revolves around the question of

whether petitioner was bound by the bill of lading. We
shall, thus, discuss the above four issues as they intertwine
with this main question.
The Court’s Ruling
The petition is partly meritorious. We affirm petitioner’s

liability for demurrage, but modify the interest rate
thereon.
_______________
6 Rollo, p. 35.
7 The case was deemed submitted for resolution on June 3, 1996 upon
this Court’s receipt of petitioner’s memorandum.
8 Petitioner’s memorandum, p. 4; rollo, p. 87.
263
VOL. 286, FEBRUARY 12, 1998 263

Main Issue: Liability Under the Bill of Lading
A bill of lading serves two functions. First, it is a receipt for

the goods shipped. Second, it is a contract by which three
parties, namely, the shipper, the carrier, and the consignee
undertake specific
9
responsibilities and assume stipulated
obligations. A “bill of lading delivered and accepted
constitutes
10
the contract of carriage even though not
signed,” because the “(a)cceptance of a paper containing
the terms of a proposed contract generally constitutes an
acceptance of the contract and of all of its terms and
conditions
11
of which the acceptor has actual or constructive
notice.” In a nutshell, the acceptance of a bill of lading by
the shipper and the consignee, with full knowledge of its
contents, gives rise to the presumption
12
that the same was a
perfected and binding contract.
In the case at bar, both lower courts held that the bill of
lading was a valid and perfected contract between the
shipper (Ho Kee), the consignee (Petitioner Keng Hua), and
the carrier (Private Respondent Sea-Land). Section 17 of
the bill of lading provided that the shipper and the
consignee were liable for the payment of demurrage
charges for the failure to discharge the containerized
shipment beyond the grace period allowed by tariff rules.

Applying said stipulation, both lower courts found
petitioner liable. The aforementioned section of the bill of
lading reads:
“17. COOPERAGE FINES. The shipper and consignee shall be

liable for, indemnify the carrier and ship and hold them harmless
against, and the carrier shall have a lien on the goods for, all
expenses and charges for mending cooperage, baling, repairing or
_______________
9 Magellan Mftg. Marketing Corp. vs. Court of Appeals, 201 SCRA 102, 110,
August 22, 1991, per Regalado, J.
10 13 C.J.S. 239. See also Pan American World Airways, Inc. vs. IAC, 164 SCRA
268, 275, August 11, 1988; citing Ong Yiu vs. Court of Appeals, 91 SCRA 223, 231,
June 29, 1979.
11 17 C.J.S. 672.
12 Saludo, Jr. vs. Court of Appeals, 207 SCRA 498, 527-528, March 23, 1992.
264

reconditioning the goods, or the van, trailers or containers, and all

expenses incurred in protecting, caring for or otherwise made for
the benefit of the goods, whether the goods be damaged or not,
and for any payment, expense, penalty fine, dues, duty, tax or
impost, loss, damage, detention, demurrage, or liability of
whatsoever nature, sustained or incurred by or levied upon the
carrier or the ship in connection with the goods or by reason of the
goods being or having been on board, or because of shipper’s
failure to procure consular or other proper permits, certificates or
any papers that may be required at any port or place or shipper’s
failure to supply information or otherwise to comply with all laws,
regulations and requirements of law in connection with the goods
of from any other act or omission of the shipper or consignee.”
(Italics supplied.)
Petitioner contends, however, that it should not be bound

by the bill of lading because it never gave its consent
thereto. Although petitioner admits “physical acceptance”
of the bill of lading, it argues that its subsequent actions
belie the finding13 that it accepted the terms and conditions
printed therein. Petitioner cites as support the “Notice of
Refused or On Hand Freight” it received on November 2,
1982 from private respondent, which acknowledged that
petitioner declined to accept the shipment. Petitioner adds
that it sent a copy of the said notice to the shipper on

December 29, 1982. Petitioner points to its January 24,
1983 letter to the private respondent, stressing “that its
acceptance of the bill of lading would be tantamount to an
act of smuggling as the amount it had imported (with full
documentary support) was only (at that time) for 10,000
kilograms and not for 20,313 kilograms as stated in the bill
of lading” and “could lay them vulnerable to legal sanctions
for violation
14
of customs and tariff as well as Central Bank
laws.” Petitioner further argues that the demurrage “was
a consequence of the shipper’s mistake” of shipping more
than what was bought. The discrepancy in the amount of
waste paper it actually purchased, as reflected in the
invoice
_______________
13 Ibid., p. 5; rollo, p. 88.

14 Ibid., pp. 5-6; rollo, pp. 88-89.
265
VOL. 286, FEBRUARY 12, 1998 265

vis-à-vis the excess amount in the bill of 15lading, allegedly

justifies its refusal to accept the shipment.
Petitioner Bound by the Bill of Lading

We are not persuaded. Petitioner admits that it “received
the bill of16 lading immediately 17
after the arrival of the
shipment” on July 8, 1982. Having been afforded an
opportunity to examine the said document, petitioner did
not immediately object to or dissent from any term or
stipulation therein. It was only six months later, on
January 24, 1983, that petitioner sent a letter to private
respondent saying that it could not accept the shipment.
Petitioner’s inaction for such a long period conveys the
clear inference that it accepted the terms and conditions of
the bill of lading. Moreover, said letter spoke only of
petitioner’s inability to use the delivery permit, i.e. to pick
up the cargo, due to the shipper’s failure to comply with the
terms and conditions of the letter of credit, for which
reason the bill of lading and other shipping18 documents
were returned by the “banks” to the shipper. The letter
merely proved petitioner’s refusal to pick up the cargo, not
its rejection of the bill of lading.
Petitioner’s reliance on the Notice of Refused or On

Hand Freight, as proof of its nonacceptance of the bill of
lading, is of no consequence. Said notice was not written by
petitioner; it was sent by private respondent to petitioner
in November 1982, or four months after petitioner received
the bill of lad-ing. If the notice has any legal significance at
all, it is to highlight petitioner’s prolonged failure to object
to the bill of lading. Contrary to petitioner’s contention, the
notice and the
_______________
15 Petitioner’s memorandum, pp. 9-10; rollo, pp. 92-93.

16 See petitioner’s motion for reconsideration before the Court of
Appeals, p. 2; record of the Court of Appeals, p. 81.
17 See Exhibit B, Folder of Exhibits, p. 2.
18 See Exhibit D, Folder of Exhibits, p. 5.
266

letter support—not belie—the findings of the two lower

courts that the bill of lading was impliedly accepted by
petitioner.
As aptly stated by Respondent Court of Appeals:
“In the instant case, (herein petitioner) cannot and did not allege
non-receipt of its copy of the bill of lading from the shipper.
Hence, the terms and conditions as well as the various entries
contained therein were brought to its knowledge. (Herein
petitioner) accepted the bill of lading without interposing any
objection as to its contents. This raises the presumption that
(herein petitioner) agreed to the entries and stipulations imposed
therein.
Moreover, it is puzzling that (herein petitioner) allowed
months to pass, six (6) months to be exact, before notifying (herein
private respondent) of the ‘wrong shipment.’ It was only on
January 24, 1983 that (herein petitioner) sent (herein private
respondent) such a letter of notification (Exh. D for plaintiff, Exh.
4 for defendant; p. 5, Folder of Exhibits). Thus, for the duration of
those six months (herein private respondent) never knew the
reason for (herein petitioner’s) refusal to discharge the shipment.
After accepting the bill of lading, receiving notices of arrival of
the shipment, failing to object thereto, (herein petitioner) cannot
now deny that it is bound by the terms in the bill of lading. If it
did not intend to be bound, (herein petitioner) would not have
waited for six months to lapse before finally bringing the matter
to (herein private respondent’s) attention. The most logical
reaction in such a case would be to immediately verify the matter
with the other parties involved. In this case, however, (herein
petitioner) unreasonably detained 19
(herein private respondent’s)
vessel to the latter’s prejudice.”
Petitioner’s attempt to evade its obligation to receive the

shipment on the pretext that this may cause it to violate
customs, tariff and central bank laws must likewise fail.
Mere apprehension of violating said laws, without a clear
demonstration that taking20 delivery of the shipment has
become legally impossible, cannot defeat the petitioner’s
contractual obligation and liability under the bill of lading.
_______________
19 Decision of the Court of Appeals, pp. 4-5; rollo, pp. 23-24.

20 Art. 1266 of the Civil Code provides:
267
VOL. 286, FEBRUARY 12, 1998 267

In any event, the issue of whether petitioner accepted the

bill of lading was raised for the first time only in
petitioner’s memorandum before this Court. Clearly, we
cannot now entertain an issue raised for the very first time
on appeal, in deference to the well-settled doctrine that
“(a)n issue raised for the first time on appeal and not raised
timely in the proceedings in the lower court is barred by
estoppel. Questions raised on appeal must be within the
issues framed by the parties and, consequently, issues not
raised in the21
trial court cannot be raised for the first time
on appeal.”
In the case at bar, the prolonged failure of petitioner to
receive and discharge the cargo from the private
respondent’s vessel constitutes a violation of the terms of
the bill of lading. It should thus be liable for demurrage to
the former. 22
In The Apollon, Justice Story made the following
relevant comment on the nature of demurrage:
“In truth, demurrage is merely an allowance or compensation for

the delay or detention of a vessel. It is often a matter of contract,
but not necessarily so. The very circumstance that in ordinary
commercial voyages, a particular sum is deemed by the parties a
fair compensation for delays, is the very reason why it is, and
ought to be, adopted as a measure of compensation, in cases ex
delicto. What fairer rule can be adopted than that which founds
itself upon mercantile usage as to indemnity, and fixes a
recompense upon the deliberate consideration of all the
circumstances attending the usual earnings and expenditures in
common voyages? It appears to us that an allowance, by way of
demurrage, is the true measure of damages in all cases of mere
detention, for that allowance has reference23 to the ship’s expenses,
wear and tear, and common employment.”
_______________
“Art. 1266. The debtor in obligations to do shall also be released when

the prestation becomes legally or physically impossible without the fault
of the obligor.”
21 Sanchez vs. Court of Appeals, G.R. No. 108947, p. 28, September 29,
1997, per Panganiban, J.; quoting Caltex (Philippines), Inc. vs. Court of
Appeals, 212 SCRA 448, 461, August 10, 1992, per Regalado, J.
22 22 U.S. (9 Wheat.) 362; 6 L. Ed. 111 (1824).
23 22 U.S. at 378.
268

Amount of Demurrage Charges

Petitioner argues that it is not obligated to pay any
demurrage charges because, prior to the filing of the
complaint, private respondent made no demand for the
sum of P67,340. Moreover, private respondent’s loss and
prevention manager, Loi Gillera, demanded P50,260; but
its counsel, Sofronio Larcia, subsequently asked for a
different amount of P37,800.
Petitioner’s position is puerile. The amount of
demurrage charges in the sum of P67,340 is a factual
conclusion of the trial court that was affirmed
24
by the Court
of Appeals and, thus, binding on this Court. Besides,25 such
factual finding is supported by the extant evidence. The
apparent discrepancy was a result of the variance of the
dates when the two demands were made. Necessarily, the
longer the cargo remained unclaimed, the higher the 26
demurrage. Thus, while in his letter dated April 24, 1983,
private respondent’s counsel demanded payment of only
P37,800, the additional demurrage incurred by petitioner
due to its continued refusal to receive delivery of the cargo
ballooned to P67,340 by November 22, 1983. The testimony

of Counsel Sofronio Larcia as regards said letter of April
24, 1983 elucidates, viz.:
“Q Now, after you sent this letter, do you know what

happened?
A Defendant continued to refuse to take delivery of the
shipment and the shipment stayed at the port for a
longer period.
Q So, what happened to the shipment?
A The shipment incurred additional demurrage charges
which amounted to P67,340.00 as of November 22,
1983 or more than a year after—almost a year after the
shipment arrived at the port.
_______________
24 Fuentes vs. Court of Appeals, G.R. No. 109849, p. 9, February 26,

1997, per Panganiban, J.
25 See computation of CBCS Guaranteed Fast Collection Services, Exh.
F-1, Folder of Exhibits, p. 8.
26 Exh. E, Folder of Exhibits, p. 6.
269
VOL. 286, FEBRUARY 12, 1998 269

Q So, what did you do?

A We requested our collection27
agency to pursue the
collection of this amount.”
Bill of Lading Separate from Other Letter of Credit

Arrangements
In a letter of credit, there are three distinct and
independent contracts: (1) the contract of sale between the
buyer and the seller, (2) the contract of the buyer with the
issuing bank, and (3) the letter of credit proper in which
the bank promises to pay the seller pursuant to the terms
and conditions stated therein. “Few things are more clearly
settled in law than that the three contracts which make up
the letter of credit arrangement 28are to be maintained in a
state of perpetual sepa-ration.” A transaction involving
the purchase of goods may also require, apart from a letter
of credit, a contract of transportation specially when the
seller and the buyer are not in the same locale or country,
and the goods purchased have to be transported to the
latter.
Hence, the contract of carriage, as stipulated in the bill
of lading in the present case, must be treated
independently of the contract of sale between the seller and
the buyer, and the contract for the issuance of a letter of
credit between the buyer and the issuing bank. Any
discrepancy between the amount of the goods described in
the commercial invoice in the contract of sale and the
amount allowed in the letter of credit will not affect the
validity and enforceability of the contract of carriage as
embodied in the bill of lading. As the bank cannot be
expected to look beyond the documents presented
29
to it by
the seller pursuant to the letter of credit, neither can the
carrier be expected to go beyond the representations of the
shipper in the bill of lading and to verify their
_______________
27 TSN, pp. 5-6, August 31, 1988.

28 Gilmore, Grant and Black, Charles, The Law of Admiralty, p. 120,
2nd ed. (1975).
29 See Irrevocable Letter of Credit No. 82-1858, rollo, p. 11.
270

accuracy vis-à-vis the commercial invoice and the letter of

credit. Thus, the discrepancy between the amount of goods
indicated in the invoice and the amount in the bill of lading
cannot negate petitioner’s obligation to private respondent
arising from the contract of transportation. Furthermore,
private respondent, as carrier, had no knowledge of the
contents of the container. The contract of carriage was
under the arrangement known as “Shipper’s Load And
Count,” and the shipper was solely responsible for the
loading of the container while the carrier was oblivious to
the contents of the shipment. Petitioner’s remedy in case of
overshipment lies against the seller/shipper, not against
the carrier.
Payment of Interest
Petitioner posits that it “first knew” of the demurrage claim
of P67,340 only when it received, by summons, private
respondent’s complaint. Hence, interest may not be allowed
to run from the date of private respondent’s extrajudicial

demands on March 8, 1983 for P50,260 or on April 24, 1983
for P37,800, considering
30
that, in both cases, “there was no
demand for interest.” We agree.
Jurisprudence teaches us:
“2. When an obligation, not constituting a loan or forbearance of

money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably ascertained).
The actual base for the compu-
_______________
30 Petitioner’s memorandum, p. 10; rollo, p. 93.
271
VOL. 286, FEBRUARY 12, 1998 271

tation of legal interest shall, in any case, be on the amount finally

adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this
interim period being 31deemed to be by then an equivalent to a
forbearance of credit.”
The case before us involves an obligation not arising from a

loan or forbearance of money; thus, pursuant to Article
2209 of the Civil Code, the applicable interest rate is six
percent per annum. Since the bill of lading did not specify
the amount of demurrage, and the sum claimed by private
respondent increased as the days went by, the total amount
demanded cannot be deemed to have been established with
reasonable cer-tainty until the trial court rendered its
judgment. Indeed, “(u)nliquidated damages or claims, it is
said, are those which are not or cannot be known until
definitely ascertained, assessed 32and determined by the

courts after presentation of proof.” Consequently, the legal
interest rate is six percent, to be computed from September
28, 1990, the date of the trial court’s decision.
33
And in
accordance34
with Philippine National Bank and Eastern
Shipping, the rate of twelve percent per annum shall be
charged on the total then outstanding, from the time the
judgment becomes final and executory until its satisfaction.
Finally, the Court notes that the matter of attorney’s
fees was taken up only in the dispositive portion of the trial
court’s decision. This falls short of the settled requirement
that the text of the decision should state the reason for the
award of
_______________
31 Eastern Shipping Lines, Inc. vs. Court of Appeals, 234 SCRA 88, July
12, 1994, per Vitug, J. See also Philippine National Bank vs. Court of
Appeals, 263 SCRA 766, 770, October 30, 1996.
32 Central Azucarera de Bais vs. Court of Appeals, 188 SCRA 328, 339,
August 3, 1990, per Regalado, J.
33 263 SCRA at 772.
34 234 SCRA at 97.
272

Ayala Investment & Development Corp. vs. Court of
Appeals
attorney’s fees, for without such justification, its award

would be a “conclusion without a premise, its 35
basis being
improperly left to speculation and conjecture.”
WHEREFORE, the assailed Decision is hereby
AFFIRMED with the MODIFICATION that the legal
interest of six percent per annum shall be computed from
September 28, 1990 until its full payment before finality of
judgment. The rate of interest shall be adjusted to twelve
percent per annum, computed from the time said judgment
became final and execu-tory until full satisfaction. The
award of attorney’s fees is DELETED.
SO ORDERED.
Davide, Jr. (Chairman), Bellosillo, Vitug and

Quisum-bing, JJ., concur.
Assailed decision affirmed with modification.
——o0o——
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Keng Hua Paper Products Co., Inc. vs. Court of Appeals

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Keng Hua Paper Products Co., Inc. vs. Court of Appeals

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8/31/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 286

VOL. 286, FEBRUARY 12, 1998 257

KENG HUA PAPER PRODUCTS CO., INC., petitioner, vs.

Commercial Law; Bills of Lading; Nature of a Bill of Lading.

of no consequence. Said notice was not written by petitioner; it

258 SUPREME COURT REPORTS ANNOTATED

Keng Hua Paper Products Co., Inc. vs. Court of Appeals

Remedial Law; Appeals; Questions raised on appeal must be

VOL. 286, FEBRUARY 12, 1998 259

Keng Hua Paper Products Co., Inc. vs. Court of Appeals

and not raised timely in the proceedings in the lower court is

PETITION for review on certiorari of a decision of the

The facts are stated in the opinion of the Court.

What is the nature of a bill of lading? When does a bill of

Statement of the Case

These are the main questions

1 Rollo, pp. 20-32.

260 SUPREME COURT REPORTS ANNOTATED

May 20, 19943

“WHEREFORE, the Court finds by preponderance of evidence

1. The sum of P67,340.00 as demurrage charges, with

The factual antecedents of this case as found by the Court

“Plaintiff (herein private respondent), a shipping company, is a

(herein petitioner), Keng Hua Paper Products, Co. in Manila. A

VOL. 286, FEBRUARY 12, 1998 261

As previously mentioned, the RTC found petitioner liable

262 SUPREME COURT REPORTS ANNOTATED

Respondent Court of Appeals denied the appeal and

In its memorandum, petitioner submits the following

“I. Whether or not petitioner had accepted the bill of

In the main, the case revolves around the question of

The Court’s Ruling

The petition is partly meritorious. We affirm petitioner’s

VOL. 286, FEBRUARY 12, 1998 263

Main Issue: Liability Under the Bill of Lading

A bill of lading serves two functions. First, it is a receipt for

shipment beyond the grace period allowed by tariff rules.

“17. COOPERAGE FINES. The shipper and consignee shall be

264 SUPREME COURT REPORTS ANNOTATED

reconditioning the goods, or the van, trailers or containers, and all

Petitioner contends, however, that it should not be bound

that it sent a copy of the said notice to the shipper on

13 Ibid., p. 5; rollo, p. 88.

VOL. 286, FEBRUARY 12, 1998 265

vis-à-vis the excess amount in the bill of 15lading, allegedly

Petitioner Bound by the Bill of Lading

Petitioner’s reliance on the Notice of Refused or On

15 Petitioner’s memorandum, pp. 9-10; rollo, pp. 92-93.

266 SUPREME COURT REPORTS ANNOTATED

letter support—not belie—the findings of the two lower

Petitioner’s attempt to evade its obligation to receive the

19 Decision of the Court of Appeals, pp. 4-5; rollo, pp. 23-24.

VOL. 286, FEBRUARY 12, 1998 267

In any event, the issue of whether petitioner accepted the

“In truth, demurrage is merely an allowance or compensation for

“Art. 1266. The debtor in obligations to do shall also be released when

268 SUPREME COURT REPORTS ANNOTATED

Amount of Demurrage Charges

ballooned to P67,340 by November 22, 1983. The testimony

“Q Now, after you sent this letter, do you know what

24 Fuentes vs. Court of Appeals, G.R. No. 109849, p. 9, February 26,

VOL. 286, FEBRUARY 12, 1998 269

Q So, what did you do?

Bill of Lading Separate from Other Letter of Credit